Published in Jacksons Magazine - July 2007

The spotlight has turned again onto the issue of pre-nuptial agreements. In handing down its recent judgment in the "huge money" case of Charman -v- Charman, the English Court of Appeal called for a review of the asset distribution process on divorce and, in particular, the status of pre-nuptial agreements. This is hardly surprising considering that the litigation in Charman ran on for three years, racked up legal costs in excess of £5 million and resulted in Mr Charman being ordered to make the biggest payout (£48 million from his £131 million fortune) in English divorce history.

However, even if Mr and Mrs Charman had entered into a pre-nuptial agreement, the Court would not have been obliged to follow it to the letter or, indeed, at all. Unlike many states in the USA and even many countries in Europe, pre-nuptial agreements do not have the force of law in England (or, indeed, in Jersey.)

Public policy considerations have thus far overridden all arguments in favour of giving legal status to pre-nuptial agreements. A desire to preserve both the sanctity of marriage and the unfettered discretion of the family courts remains key.

However, whilst most marrying couples either remain blissfully optimistic or simply unable to discuss the issue, an increasing number are becoming wise to the fact that the existence of a pre-nuptial agreement can have a dramatic effect in the event that the marriage does not work out. A body of case law is emerging which shows that, rather than simply dismissing the presence of a pre-nuptial agreement out of hand, the English family courts will take it into account as one of the circumstances to which it should have regard.

To enhance the persuasiveness of such an agreement, it should comply with certain safeguards:-

• the parties should have entered into it willingly;
• it should be signed at least twenty-one days before the wedding;
• the exchange of financial information should have taken place between the parties;
• the parties should each have been separately advised (preferably by family law specialists) as to the likely consequences of their actions; and
• the legal representatives should each sign a certificate confirming that appropriate advice has been given.

Above all, the agreement should be fair. What is fair will largely depend on what has happened between the time that the parties entered into the pre-nuptial agreement and the time of separation. As such, pre-nuptial agreements tend to be more closely followed where the marriage is short and where circumstances have changed little.

In the 2003 English case of K -v- K, (a short marriage of only fourteen months' duration), the court upheld the capital aspect of the agreement, meaning that the wife only received a lump sum of £120,000 from assets of the husband worth in excess of £25 million. However, even though the agreement had made provision for a child (the wife was pregnant at the time of signing) the Court did not uphold those aspects of it on the basis that they were inadequate.

Case law also suggests that the family court may be prepared to distinguish assets acquired before the marriage from those generated during. As such, parties seeking to ring-fence an inheritance or assets acquired prior to the marriage may find that the court is more readily willing to uphold those aspects of any pre-nuptial agreement.

Clearly, even without legislative change, pre-nuptial agreements are influencing the outcome of cases. In light of the recent Charman judgment (and numerous previous calls for reform) it seems only a matter of time before pre-nuptial agreements will be given the force of law. In that event, parties are likely to enjoy greater certainty of outcome on marriage breakdown whilst avoiding the expense and acrimony of litigation.